William Cash
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Public Procurement
William Cash Excerpts(12 years, 8 months ago)
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Mr William Cash (Stone) (Con)
A big issue that has cropped up in the past year is that of Bombardier. The question that the hon. Member for St Helens North (Mr Watts) just asked is apposite because this is not simply a question of whether there are fair rules on procurement in terms of competition. Because a legal framework has been created, there is a special and fundamental requirement to comply with those rules because they are part of the legal process. The problem is not merely whether proper competition is being avoided but whether the law is being breached as well.
Mr Harper
I thank my hon. Friend for making that point. On the specific issue of procuring rolling stock, he will know that when this came up in the House last year the then Transport Secretary made it clear that the bids were being evaluated by criteria laid down by the previous Government. The problem was that we had to follow the criteria that were already laid down. The then Secretary of State also said that we would look at procurement in the growth review that was under way, and that we would look at what happens in other EU countries that are constrained by the same rules and at best procurement practices to make sure that, where appropriate, we include appropriate socio-economic criteria in the procurement decisions. That has to be done right at the beginning; we cannot set out the criteria and then change the rules part way through the process to favour domestic bidders. I have looked in detail at the particular case my hon. Friend mentions and it was made clear that the decisions that people are not happy with were taken under the previous Government and that we had to implement them. The alternative would have been to suspend the procurement process completely and go right back to the drawing board.
Mr Cash
After 28 years in this place one gets a sense for when a Minister wants to get to the end of his speech as quickly as possible, particularly when he is being assailed on all sides. May I just ask whether a full analysis has been made by the Government through the appropriate Department—not his Department, but the Department for Business, Innovation and Skills—of whether there has been a real investigation into the way public procurement operates in this country as compared with the rest of Europe?
Mr Harper
The short and honest answer is that I do not know. I will find out and make sure that I or my right hon. Friend the Minister for the Cabinet Office writes to my hon. Friend to let him know.
I was not close to sitting down because I was about to set out the three areas in which the Government have subsidiarity concerns about the proposed oversight body—concerns that are shared by the European Scrutiny Committee. First, the oversight body was not proposed in the Commission’s consultation green paper or otherwise consulted on, so neither member states nor anyone else had an opportunity to comment on the proposal. The Commission’s impact assessment does not provide a clear or detailed justification. The European Scrutiny Committee expressed similar concerns about the inadequacy of the Commission’s impact assessment when we debated the common European sales law.
Secondly, the proposal for a single, national oversight body in each member state does not recognise or respect the different legal systems within the UK. As Members are well aware, Scotland has a separate and distinct legal system. Under the devolution arrangements, the development and application of public procurement policy and the implementation of public procurement legislation are devolved matters in both Scotland and Northern Ireland. As I have mentioned, Scotland has chosen to implement the procurement directives separately. The requirement for a single national oversight body for a member state is inconsistent with those settlements, and the Commission has not demonstrated any objective necessity for a single body in each member state.
The third substantial concern is the proposal that the oversight body should be empowered to seize the jurisdiction currently resting with the courts to determine some disputes about compliance with the procurement rules. That would be a judicial function, whereas the other functions of the body would be administrative or regulatory. If they were all combined in one body, that would intrude unjustifiably in national legal and judicial structures. That would be inconsistent with the UK’s legal traditions in which a clear distinction is made between judicial and administrative functions. The remedies rules that I mentioned earlier leave it to member states to determine the legal structures that enforce the rules. There seems to be no clear justification for departing from those now. This might affect other member states as well.
As I have said, a number of other member state Governments will have issues with the national oversight body, whether on grounds of bureaucracy, cost, incompatibility with existing arrangements or subsidiarity. The Parliament of one country has already set out similar concerns to ours in a reasoned opinion. The debate has been very helpful and the European Scrutiny Committee’s motion is very welcome. I look forward to listening to other Members and having the opportunity to support the motion and have this House take a sensible decision today.
Jacob Rees-Mogg
If I may divert from the set text from the European Scrutiny Committee, it is always worth remembering that subsidiarity started as a theological term in the Roman Catholic Church, of which I am a member. That is one of the most centralised bodies of any organisation anywhere in the world, with power vested in the Holy Father, so I have always been rather suspicious as to what the purpose of subsidiarity is.
Mr William Cash (Stone) (Con)
As a fellow Catholic, may I ask my hon. Friend whether he agrees that it is one thing to have the Jesuitical concept of subsidiarity, which has been brought into the rule-making of the European Union, as a theological question, and that it would be far better if the matter were regarded purely as one of theology and not exclusively one for political purposes?
Jacob Rees-Mogg
I am grateful to my hon. Friend for his helpful intervention. I do not think one should use the term “Jesuitical” too pejoratively, as the Jesuits are a fine body who, I believe, educated my hon. Friend—
Jacob Rees-Mogg
With enormous success, which is acknowledged around the country and for which we are all grateful. However, I agree with the fundamental point that it is a political rather than a theological reality in this case.
By virtue of article 5 of protocol No. 2, any draft legislative Act should contain a “detailed statement” making it possible to appraise its compliance with the principles of subsidiarity and proportionality.
I turn now to the Committee’s view, as expressed in the draft reasoned opinion. The first conclusion we came to was that the Commission had failed to consult member states in the Green Paper, or otherwise, on the possibility of setting up a single national oversight body. This is in clear breach of article 2 of protocol No. 2, and I ask the Minister to say whether he agrees with this, and whether he intends to pursue it with the Commission.
Similarly, there is no evidence in the Commission’s explanatory memorandum or impact assessment of it carrying out the requirement under article 5 of protocol No. 2 to prepare a “detailed statement” containing
“some assessment . . . in the case of a directive of its implications for the rules to be put in place by Member States, including where necessary the regional legislation”.
As a consequence, the draft directive on public procurement and, by implication, the draft directive on procurement by public entities is said by the National Assembly for Wales to breach the devolution principle in both Wales and Scotland. I quote from the letter of 23 February from the National Assembly for Wales:
“The proposal also fails to have regard to the principle of devolution in imposing the duties on a single body.”
Kelvin Hopkins (Luton North) (Lab)
It is always a great pleasure to listen to the hon. Member for North East Somerset (Jacob Rees-Mogg), whose speech was properly prepared and helpful to the debate. I am very pleased with the Government’s motion, and it is not often that I am unqualified in my support for the Government. Indeed, from time to time I am critical of my own side, although the robust speech by my hon. Friend the Member for Barnsley East (Michael Dugher) was also very welcome. We also heard some particularly helpful interventions from both sides of the House, and I concur with them all.
I am happy to speak in favour of the motion and support the principle of subsidiarity in this instance. The proposal states:
“The subsidiarity principle applies in so far as the proposal does not fall under the exclusive competence of the EU.”
I am rather pleased that the national health service and various other public bodies do not fall under the exclusive competence of the EU. In fact, I rather like them being under the exclusive competence of the British Parliament, but that is my personal view. I think that we ought to decide democratically what we do with our public services and not be dictated to by anyone else.
We are putting forward a reasoned opinion, but I would go even further and call it a reasoned opposition. Indeed, I think that opt-outs or derogations would be preferable to subsidiarity, as I have argued from time to time. The Government have talked about the possibility of regaining some powers from Brussels, and I could suggest one or two to be returned—but that might go beyond the boundaries of the debate.
The draft directive is about contracting authorities or public bodies, but some of those are now more or less in the private sector, so I am not sure whether they really fall within the scope of the EU’s proposal. The idea of a national oversight body, presumably set up by the British Government, that would police British contractors or contracting organisations on behalf of the EU is bizarre. If the EU wants to set up a body to police things, it should do that itself. It should not expect us to do it. Even then, I would, of course, object.
We are talking about the EU trying to lever public services into the marketplace, and the EU marketplace rather than the British one. I am in favour of strong public sector organisations with public sector employees, paid for publicly and accountable to this Parliament, local authorities or other public bodies. I am against the privatisation of our public services in principle, but if there is to be any private involvement it should be British private involvement, and we should not see our public services sold off to foreign organisations over which we have little control, if any. The whole proposal is unacceptable.
The European Scrutiny Committee’s document refers to social services. It states:
“The evaluation on the impact and effectiveness of EU public procurement legislation has shown that social, health and education services have specific characteristics which make them inappropriate for the application of the regular procedures for the award of public service contracts.”
That is a long way of saying that it is inappropriate for the EU to intervene in our public services, and I strongly agree. I am a member of the European Scrutiny Committee. Sadly, on this rare occasion I was unable to attend the meeting at which the matter was discussed, as I was out of the country on parliamentary business—I obviously missed an interesting and serious debate—but I absolutely support the Committee’s decision.
There have been some general comments on public procurement, what other countries do and what we do, and it has been observed that some countries seem expert at somehow managing to secure contracts for their companies rather than foreign ones. Indeed, I remember some years ago Signor Agnelli, the proprietor of Fiat, being asked why there seemed to be Fiat cars everywhere in Italy, whereas other countries seemed to import cars. He denied the existence of any sort of protectionism or arm-twisting in Italy and said that it was simply because Italians preferred to drive Fiat cars. We all know that Italy is completely above suspicion in these matters, so I will go no further.
Members also talked about railways. I really think that we have made a terrible mistake in offering the Thameslink contract to Siemens. I have been travelling on Thameslink and its predecessors for 43 years, and if the contract proceeds as we expect, I shall be very unhappy about the fact that in future I will be travelling on Siemens trains rather than Bombardier trains made in Derby.
I am known to be sceptical about the EU arrangements. I want voluntary arrangements with our fellow European countries. I am an enthusiastic European in the genuine sense. I love Europe as a place, the countries, the people, the politics and the philosophies that have come out of this great subcontinent, but I am not in favour of an ever-growing EU that is increasing its control over our lives and economies and trying to dictate how we run our countries. That should be done by democratically elected Parliaments. I hope that in time other countries will feel as we do about that. With the current crisis in the eurozone, I suspect that other countries are already starting to think in those terms. The Greeks are very unhappy about what is happening, and who can blame them? Around 25% of their population are unemployed. Wisely, the UK has been somewhat more sceptical of the EU, and perhaps has been leading the way towards a more sensible future for the whole of Europe in the coming years.
Mr William Cash (Stone) (Con)
I see that the Minister is anxious to get to his feet and am sorry to have to disappoint him, but it will not be for long.
As my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) dealt so well with the European Scrutiny Committee’s representations, I want to look at some of the context within which this all takes place and, in particular, draw attention to the explanatory memorandum provided by the Government. It states:
“Public procurement plays an important role in the overall economic performance of the European Union. In Europe, public purchasers spend around 18% of GDP on supplies, works and services. Given the volume of purchases, public procurement can be used as a powerful lever for achieving a Single Market fostering smart, sustainable and inclusive growth.”
There is one point to which I am bound to draw attention, and that is the figure of 18%, which is a monumental percentage of the European Union’s GDP. We therefore want to be absolutely certain that it is not subject to abuse.
There is a good degree of cross-party support on this question, and when intervening during the debate I mentioned that there are important reasons for ensuring that we are not cheated through any fancy practices by other member states. I voted for the Single European Act 1986 and wrote a letter to The Times about it, drawing attention to the difficulties that might arise if any mistakes were made in the Act’s operation. At the same time I tabled an amendment stating that nothing in the Act would derogate from the sovereignty of the United Kingdom Parliament.
As it happens, the then Speaker, Bernard—Jack—Weatherill, and I had a discussion, because I disagreed with the House officials on the selectability of my amendment. I was told in those days—I repeat, in those days—that the question of derogation from the sovereignty of the United Kingdom Parliament was regarded as reopening the whole issue of the European Communities Act 1972. In fact, it did no such thing, and I am glad to say that since then such amendments, including those on the sovereignty of the United Kingdom Parliament, have been accepted on several occasions.
That raises the question of the extent to which a single market, and the legal framework carried with it, is compliant with the general principles of competition, because we live in a global environment. We live in a world where there is a great deal of international competition, so constraining economic performance and public procurement within the single market raises one or two issues.
On the question of the manner in which the report has been put together, the explanatory memorandum states that
“the European Commission conducted in 2010/2011”—
only a short time ago—
“a comprehensive evaluation of the impact and effectiveness of EU procurement legislation drawing on an extensive body of evidence and new independent research.”
I raised that question from the UK point of view with the Minister, because it is one thing for 18% of the EU’s entire GDP to be looked at by the European Commission, in which some of us have not very much confidence, but it is another thing to ask whether the UK Government have looked at the implications for the UK, particularly in the light of recent examples, such as Bombardier.
The Minister replied, “Well, that was done under the previous Government,” but, although that is no doubt true, the question of whether it is a matter for political point-scoring does not necessarily lead us to the right conclusion. I am interested to know now what impact public procurement has on the UK vis-à-vis other member states of the European Union. That is why I asked the Minister if he would be good enough to take it up with the Business Department, and he has graciously agreed to do so.
It is clear that Germany has a monumental advantage, some of it created by its own success, when it comes to foreign direct investment in other member states—particularly in those with economic and political ties to Germany, as geographically, politically and economically such links give Berlin substantial leverage over those countries. That process is in part leading to a distortion of the EU’s overall objectives, hence the increasing concern that Germany is becoming not merely the predominant member of the European Union but the dominating element. I say that in no hostile sense—just that I think it is bad for Germany, for Europe and for the UK.
Kelvin Hopkins
It has been said that the European Union is one way of avoiding conflict between the nations of Europe, but, with the pressures inside the eurozone at the moment, tensions are being exacerbated by the European Union, not lessened.
Mr Cash
I do not need to go any further down that route, other than to say that public procurement amounting to 18% of the EU’s GDP represents a significant advantage to countries with the maximum degree of foreign direct investment, if they are able to induce the Governments and official bodies of those countries to procure for them the return that they no doubt feel is justified, given the contribution that countries such as Germany make to the European Union as a whole. All that requires a great deal of careful analysis.
I do not want to be unduly suspicious, but I fear that there is a considerable amount of hand-wringing over the extent to which Germany is expected to contribute to the European Union in relation, for example, to Greece and to Spain, when in fact, as Wolfgang Münchau said in the Financial Times a couple of days ago, the root problem is the imbalance that Germany is creating by its refusal to import. I cannot be sure about this, but BIS should ask itself the serious question whether there is not a similar problem in relation to public procurement.
If Germany, for example, makes massive contributions to other countries in Europe, no doubt it believes that if it in turn obtains contracts for the roads, railways and all the other things that make up the public procurement system, it will therefore, through the contracts that it has secured there, receive a repayment—with fantastic profits attached, no doubt—that returns the money to Berlin. That is no doubt what it wishes to achieve—and is achieving.
Mr Watts
The hon. Gentleman hits on a real problem. As far as I can see, the German authorities, whether they be the Government, civil servants or politicians, all tend to see manufacturing as the core of what they do. They make every effort to maximise the potential work that they can generate for their own manufacturing industries. That is not the case in the UK, and we are in an unfair position because of it, so do we, as well as the Germans, need to change?
Mr Cash
I am glad that the hon. Gentleman raises that issue, because it is very much the direction in which we should go. We need an analysis and we need to know whether the UK is stepping up to the plate. We know that we have incredibly good industries, but are we making the most of them? Are we being cheated? Are we—if it falls short of cheating—being taken for a ride? Are the rules being properly complied with, and should BIS not conduct a strategic analysis of the issue, irrespective of the fact that the Business Secretary, being a Liberal Democrat, has an apparent abhorrence of investigating what I should like him to look at in terms of the inadequacies and manipulations of the European Union?
I am not being hostile or over-suspicious, but when 18% of GDP is tied up in such public procurement, it is very important for us to be completely sure that we are having a calm and collected look at the extent to which it operates for or against us. The evidence on Bombardier suggested that things had gone badly wrong. I do not really care which side of the House is at fault; as far as I am concerned, this is an opportunity to get it right. I am glad to see that those on both Front Benches are nodding in agreement, because I know that their main concern is to serve the national interest, and that would be well achieved by making such an analysis.
The document contains, as part of the study that the European Union conducted, issues relating to small and medium-sized enterprises. Bigger manufacturing industries tend to be able to look after themselves, but some SMEs need to be carefully monitored and given every possible advantage to enable them to get into the procurement market. The document also refers to the “strategic use” of procurement in Europe—strategic, I imagine, in the context of global trade.
There are deep concerns about the extent to which our water, electricity and many other main utilities are exposed to degrees of competition that are apparently not complied with in some other countries. I hope that that, too, will form part of the overall strategic analysis.
Kelvin Hopkins
Some of our utilities, such as electricity and water, are owned by foreign companies—even foreign state-owned companies—and there is a suggestion that they are exploiting the British market to subsidise their own markets.
Mr Cash
Yes. This is all part of what I would like someone to look into very carefully. We are far too used to hearing generalisations and soft words when we are in fact talking about very substantial sums of money—on a monumental scale—and the question of whether this is a fair and free market that benefits us. I take into account the remarks of my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) about the manner in which free trade operates, but for practical purposes, in terms of public procurement, I would want to be satisfied that it always works on a fair and reasonable basis and does not in any way upset the UK economy.
This is a very important debate, albeit not one that has attracted a vast amount of interest. I am afraid that these European debates, the contents of which are extremely important, do not necessarily attract the degree of attention that they deserve, because although they deal with people’s daily lives, with whether the UK economy will function effectively, and with many other areas within the rubrics of the European Union’s legislative framework, they do not have the word “domestic” stamped on them, and people think that when we talk about “Europe” we do not mean the UK. The truth is that the UK is affected very directly by everything that happens in the EU, and I want to be entirely satisfied that we get the full benefit of the trading system that the single market is supposed to provide.
Kelvin Hopkins
The work that the Chair of the European Scrutiny Committee does, in which some of us try to support him, does make a difference, and this House does hear about the realities of the European Union. I think that our Front Benchers, possibly our civil servants, and certainly the public outside appreciate that we are taking these things seriously. I pay particular tribute to the hon. Gentleman in that regard.
Mr Cash
That is extremely generous of the hon. Gentleman. I feel very strongly that we have a duty to look at these matters and to do what we can to help in debating them for the benefit of our constituents in the United Kingdom as a whole.
The explanatory memorandum contains a reference to the impact assessment and its executive summary, which gives us reason to believe that the impact on the European Union has been considered. However, the European Union is not an end in itself; it is an artificial framework that has been created for the purpose of an objective, which is, ultimately, political union. We know that. We also know, from what Chancellor Merkel has been saying recently, that that is very much tied up with her own agenda; I do not need to go down that route. We must consider the impact on the United Kingdom of the huge amount of money involved in public procurement, and the effect in relation to utilities, which may determine whether we get any energy and whether we have a proper water system, electricity system, and so forth. Enabling other countries’ companies to have control over those matters is a question not only of trading but of national security.
It is very important to have these things properly looked at. I am sure that the Minister and the duty Whips will pass on my messages to BIS, and that we will end up with a virtuous circle whereby we have a proper analysis to ensure that the United Kingdom gets what it deserves out of the European Union, and does not participate in it in ways that are, as our debate on subsidiarity amply demonstrated, unnecessary.